Book Review of “The New How” (Business Strategy Book)

It is atypical for me to write a book review for this blog, but Nilofer Merchant’s “The New How: Creating Business Solutions Through Collaborative Strategy” is very respectable contribution to both audiences of this blog and the process of strategy development in general. In particular, the book does two important things beyond other strategy books:

  • it breaks down the ivory tower of centralized strategy and addresses, in detail, the roles and responsibilities that each employee must fulfill in the new model, and
  • the book explicitly documents a collaborative process that one can use to develop strategy, a process which from my vantage point has only been addressed either through mentorship and transfer of tacit knowledge or in fragments within other documents.

The book divides strategy into two domains – 1) where a company competes, and 2) how a company competes. The premise of the book is that the former topic (where a company competes) is well-addressed by existing strategy books, such as those by Porter, Chan, Kim, and Mauborgne. Nilofer’s book addresses the gap in business texts regarding the latter topic, which includes day-to-day and quarter-to-quarter strategies, such as “how do we grow sales of product XYZ” or “how do we grow sales of division Y by Q%?”  As she writes, “One person’ strategy is another’s tactics. The unnecessary and fruitless war of what is tactics or strategy or execution must end.”

Part 1 of the book provides a call to action for individual employees and leaders. But the book goes further by providing specific responsibilities that each person must fulfill. Where I admire the book is in its approach to addressing each employee’s role. Whereas “older” methods of strategy may have been focused on executive management teams, this book provides context, terminology, and frameworks for educating a broader audience. As an aside, I am also struck by the fact that Nilofer does a good job of incorporating concepts of improvisation into the strategy development process, culture, and mindset of employees. Improvisation is especially a soft spot for me given my involvement with Business Improvisations, a collaboration between business academics and improvisation instructors which helps companies in areas such as innovation, leadership, teamwork, etc. through customized, experiential learning sessions.

Part 2 of the book goes into greater detail on process of strategy development. It breaks down the process into four major areas:

  • Question Phase – articulating the problem scope and assessing the current state of the organization
  • Envision Phase – creating options for the organization developing criteria that would be used to evaluate options
  • Select Phase – using a “MurderBoarding” process to sort, tune, fix, etc. options
  • Take Phase – creating accountability, identifying who does what, and getting down to interdependencies and execution.

Although the book goes into much greater detail on all of these areas (with specific examples, charts, tables, etc.), one of my favorite charts is the MurderBoarding overview chart (copyright image reproduced below from “The New How” via permission from Nilofer Merchant). I often find this part of the strategy development process to be at risk of falling apart – this part of the strategy process is inherently messy, and unless the team focuses on a disciplined reference framework (like the one here), it becomes too tempting and easy to try to cut corners. Look carefully at the chart and see if you have been tempted to cut corners in the process. For example, did you forget to test the idea in part before finalizing the strategy? Or did you forget to vet and refine the criteria used to evaluate a strategic option?

Diag018Even as an experienced management consultant and manager, I would highly recommend this book (I’ve also added it to my popular Crash Course Consulting Reading List). The book is practical and covers a body of knowledge that has been largely undocumented to date. Whether one explicitly uses the processes Nilofer describes, the book still provides a good framework for assessing how one is doing. This book is well-suited for corporate executives, strategic planners, general managers, and management consultants. It would also be good as a textbook to supplement strategy and/or consulting courses.

Feel free to let me know your thoughts!

How To Help Ensure Strategy Scorecards Don’t Fail You

For many strategy engagements, a lot of attention is paid to the detailed analysis framework. For example, should a benchmarking framework be used? Or will that framework lead us down a path of mediocrity? Or perhaps value-chain or Blue Ocean-like analysis should be used here? What method should we use for prioritizing brand associations and rectifying brand image versus identity? Regardless of strategy technique, one key output of these efforts is often a scorecard summary. A scorecard is tangible. It can be like a report card that you got from school in elementary school. While the scorecard is important, it’s important to not lose sight of how a scorecard is developed and what the scorecard could mean for your organization.

The figure below shows an illustrative scorecard for a company. The scorecard helps to identify strengths and weaknesses. In the scorecard below, I’ve also depicted areas where the company needs to make improvements (operational and tactical focus) and where the company needs to differentiate longer-term (strategic focus).

Traps with scorecards can happen with the processes before, during, and after the scorecard.

Common traps that can occur before the scorecard are:

  • Failing to craft the problem statement properly
  • Pursuing too narrow activities to solve the problem statement
  • Falling short on involving a broad part of the organization in the assessment & strategy development process
  • Getting the wrong mix of structured and unstructured methods
  • Using the wrong tools for the job
  • Having an inherently biased processes or failing to frame and address biases and limitations properly

Traps during the scorecard readout process include:

  • Being too negative and demotivating an organization
  • Not stepping back from the scorecard to look at the bigger picture
  • Failing to educate new audience members about the context of the scorecard and the prior processes used to arrive at the scorecard
  • Letting an organization rest on its laurels

(Very) common traps after the scorecard readout process include:

  • Failing to develop specific action plans
  • Not having a good follow-up and cadence for making progress

The picture below shows the logical context for an example scorecard process, and it is an important aspect often lost in the mix. Note that the process context for the scorecard is as important (if not more important) than the scorecard itself.

Scorecard Process 
What are your experiences with scorecards? How can you use them more effectively?

Using a “Frontier Chart” to Evaluate and Plan Project Portfolio Strategy

The introduction of new product or service lines into an existing customer base is a challenge that companies often face with new business development. Sometimes the opportunities can be readily quantified using traditional financial analysis (e.g., using net present value, scenario, and waterfall buildup methods). At other times, there may be hazards of trying to quantify an opportunity too early in the process before conceptual alignment of the stakeholders. For example, people can simply get stuck “in the weeds with the numbers”.

In this post, I share a method that I have sometimes found useful as a first step in framing and getting alignment among parties (especially when looking at new product development situations involving platforms upon which multiple products or product lines can be built). To be honest, I am not sure if there is a name for the type of chart I describe below, but I call it a “frontier chart” (which is derived from investment portfolio theory from finance).

The basic idea is that there are a set of lower risk projects out on the left side of the chart which have more known (potentially lower) expected returns. In contrast, projects on the right side might have higher risks but also higher, expected returns. So as an example of a project on the left side, a software company may have early customer engagements with a straightforward, add-on product that it directly developed (say a GPS mapping tool). As an example of a project on the right side, that same software company may be looking to introduce new platform capabilities such that indirect, 3rd parties can develop applications (e.g., Apple’s “there’s an app for that”). The later project venture is more risky, but the payoff could be larger than the former project.

Frontier Chart and Project Portfolio Strategy

A key benefit of using a frontier chart is that it can help to get buy-in on the high-level things and projects that people tend to agree with. There will be plenty of time later to put on our “propeller hats” and get bogged down in detailed numbers and execution tactics.

The ability to facilitate a company’s management team to move forward is priceless, and sometimes facilitation can be more difficult when introducing new products or services (which is outside of the core, day-to-day business). Consider using frontier charts and thinking about platform strategies (the latter which may be topic for another post).

What Are Your Thoughts On Hiring Two Consulting Firms At The Same Time?

In the past year I ran into a situation (mid-project in the capacity as an independent consultant) where the client was incorporating materials from my deliverables plus information from one of the major, worldwide strategy consulting firms that was also working in the same area as I was. In this case, I think it was beneficial because it is a high-stakes strategy area which requires mutiple perspectives, innovation, and cross-checking.

Yet it made me recall some other situations where other consulting firms had been used in closely-related or overlapping areas. Highlight memories include:

  • Bringing in a partner consulting firm to round out industry-specific knowledge to complement our functional knowledge expertise
  • Having an internal consulting group monitoring the progress of a larger, external consulting firm
  • Having an adjacent room on the client site to a "competing" consulting firm
  • Getting the consulting firms to work out and remove overlapping work areas by request of the CEO
  • Having the consulting groups to exchange, provide feedback, and critique the other firm's deliverables and engagement progress
  • Setting up the upstream consulting firm (e.g., strategy) to complement that downstream consulting firm (e.g., IT implementation)

Although there are many trends by companies to try reduce the number of suppliers (even in the professional services area), there are benefits of using multiple consultants. Some tradeoffs and considerations:

  • Getting the consultants to cooperate
  • Inefficiency created by overlapping work
  • Benefits by factoring in best perspectives from each firm (similar to the way some of the most innovative firms use a larger network design architects to feed ideas)
  • Keeping each of the consulting teams on their toes

What are your experiences and thoughts about using multiple, management consultants and/or consulting firms?


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Musings On Conducting Competitive Intelligence Ethically

Competitive intelligence (CI) is an activity done by a wide range of professionals ranging from marketers to product managers to consultants to strategic planners. Now I’ve held back for many years on posting on the subject of conducting CI ethically. I tend to be more on the conservative side, and by posting my thoughts on this subject publicly, I’ve had concerns that some clients and future employers would see me as too soft on the issue. Would a client shy away from hiring me because I was unwilling to go the “distance” to get a job done?

In spite of my concerns, I’ve decided to address the issue here. In my experience with the business world, I’ve seen the topic of ethics (in the context of CI) discussed much less frequently than I would have expected, and that should change. Here I’ll provide some examples of bread and butter methods and more infrequently used methods for conducting CI. People should feel free to comment on other methods they have used. I’ll also provide some examples of activities that I either think are questionable or outright unethical.

Here are some examples of ethical, secondary research methods for performing CI:

  • Pulling annual reports and shareholder presentations on competitors from the web
  • Analyzing securities and exchange commission (SEC) filings and financial statements
  • Gathering marketing collateral information from trade show booths of competitors
  • Obtaining industry reports from investment banks and/or financial institutions
  • Reverse engineering the positioning focus of competitors from marketing collateral
  • Searching through LinkedIn to analyze salesforce profiles and reverse engineer likely go-to-market methods
  • Analyzing resumes of employees of competitor
  • Using Google satellite to analyze geographic profile and size of competitor facilities
  • Using Crunchbase or Techcrunch to analyze private companies
  • Using Compete, Alexa, and other web services to analyze web traffic
  • Analyzing advertising copy and positioning
  • Purchasing third-party reports (e.g., Gartner, Forrester, Parks Associates) to round out research
  • Looking through job postings by the company on the web

Here are some examples of ethical, primary research methods for performing CI:

  • Interviewing a distributor that has experience with competitors and asking questions whether client’s proposed offer would be competitive
  • Asking distributor to describe any non-confidential information that they would be comfortable sharing about either the competitor or distributor’s relationship with competitor
  • Visiting retail outlets of competitor to infer go-to-market methods, assess general profile of locations, etc.
  • Directly purchasing a competitor’s service or product
  • Surveying salespeople within client organization to get their feedback on what they’ve run into with respect to selling against the competition
  • Conducting focus groups with general customers to get their feedback on competitor’s products versus the client’s prospective offerings
  • Obtaining general information by calling into a competitor’s call center

Finally, here are some examples of questionable or unethical methods of performing CI (and these topics come up somewhat frequently in my experience):

  • Misrepresenting oneself as a potential customer of competitor in order to get pricing information not made generally public
  • Asking a current distributor or employee of competitor to share proprietary information about competitors and violate non-disclosure agreements
  • Interviewing a competitor’s employees for the sole purpose of gathering competitive information as opposed to intending to consider such people for direct hire

One problem that I see organizations run into is that they can get focused on one single issue. For example, they may say “I must know exactly how competitor XYZ is pricing”. This type of logic can be dangerous because it tends to lead to one solution. It may also tempt one to try to take unethical shortcuts. If the problem statement is reframed around “getting a better picture of whether my client’s market offer is competitive”, then this can lead to more flexible and varieties of solutions. Tools like conducting customer focus groups, surveying salespeople, etc. then become possibilities for solving the real problem at hand.

As a closing note, in a framework I alluded to in a prior post, one way to think about activities are to classify them in two dimensions: (ethical – unethical) & (legal-illegal). The other framework that I use for weighing ethical issues is to determine how I would feel if my activities were plastered all over major press outlets. Would I be embarrassed by my team’s or my personal activities? Posing that type of question is often a nice litmus test for good behavior.


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Three Prototypical Styles of Consulting

Recently I found myself describing (in somewhat abstract terms) how a particular consulting engagement should come together. The upshot of my argument was that given a particular statement of work, there are a number of "ways to skin a cat" and get an engagement team to gel. In this particular case, my feeling was that an engagement approach would be equally valid if the team shifted the basis of consulting towards one of the three prototypes I describe below (even if it meant shifting away from another). The three prototypical styles of consulting are the following:

  1. Research-centric consulting– Key, detailed frameworks from brand management, business strategy, pricing, statistics, finance, etc. often form the backbone of the approach, and the consulting team can piece together a storyboard that tees up hypotheses, finds supporting or disconfirming evidence, and builds a case towards strategic options and recommendations. In this type of consulting, domain and industry expertise are somewhat less critical because a structured problem solving methodology underpins the approach. In terms of situational use as a pure style of consulting, this type of consulting may be prevalent in cases where a client lacks a rigorous approach or in cases where new businesses are being explored but where there are few role models.  
  2. Expertise-centric consulting – In this type of consulting, a consultant brings to the table either or both domain and industry knowledge. For example, has the consultant helped to launch a mobile virtual operator before? Or does the consultant specialize in an expertise niche such as optimizing cross-media spending for mega brands using econometric approaches? Or has a consultant worked in brand litigation and expert witness cases related to marketing? Can the consultant bring forth an engagement structure that has been tested before in another situation?
  3. Facilitative consulting – In this style, the consultant brings value to the table by bringing personal experiences and skills to the table. The consultant may also bring third-party perspectives which also add value. But the real value is in weaving together the consulting team and client team to solve the customer problem statement. For example, the consultant may conduct client interviews with separate functional groups within the client organization and with client customers. The consultant then organizes and normalizes information from the various interviews and develops strategic options and skeleton structures that can be used in iterative client meetings to refine & finalize strategy (e.g., by tapping into client expertise and having the consultant help with any subsequent research, analysis, and support). In my mind, the facilitative approach is akin to combining the skills of a general manager with a project manager. For more on the facilitative approach, please see a prior post of mine here.

The prototypical styles of consulting that I describe above are not mutually exclusive. Often engagements will have multiple aspects, although I've seen valuable engagements that are more pure within one prototype. I think that many consultants, general managers, and project manager types could benefit by understanding the consulting prototypes better. In some sense, they are like the primary colors for setting the tone and custom mixing a consulting engagement.


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Interview On The Ethics Of Consulting

I was recently asked to do an interview at the consultant website, "Think Like A Consultant" on ethics & consulting. The full interview is posted here.

One question particularly of note was "What are the best ways to handle a client who appears to have unethical practices?" For that question, I responded as follows:

Fortunately, I have not been posed with many situations that are obviously troublesome. One area that comes to mind, however, is when a client asks a consultant to perform competitive intelligence, especially when soliciting for primary market information. Let’s say that a client has asked you to masquerade as customer and try to obtain information on a competitor (e.g., on pricing). Some company codes of ethics would strictly disallow this, as would many people’s personal ethical value system.

What I would try to do in these circumstances is to rework the problem statement and methods with the client. For example, perhaps the problem statement may be more about getting higher confidence in prospective pricing levels that the client is looking to put in the market as opposed to getting the exact pricing levels from the competitor. With the problem statement refined, you may find opportunities to solve the client’s problem in a more palatable way, such as through running focus groups with customers or industry distributors, conducting benchmarking studies, and other approaches.

Articulating and rearticulating problem statements are something fundamental to consulting and something which I've addressed before. For example, see here.

In any case, I'd be interested in feedback on the interview from folks. It is my third or fourth serious post in the blogpshere related to ethics, and I don't expect it to be my last.


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Some Of My Scattered Notes On Pro-bono Consulting Via Taproot Foundation

For those interested in nonprofit and pro-bono consulting, I have started to dip my toes in with the Taproot Foundation to do a greater good for the community. The economy is tough, and I should put myself to good use. Have not started any projects yet, but I am going through director training. I have some scattered thoughts and notes here and here, and these thoughts and perspectives are mainly in the context of a person who has spent most time in commercial consulting.

As a digression, I encourage those that follow this blog to do so via email subscription or RSS feed. The updates on this blog are somewhat infrequent, primarily because I try to include limited scope & more substantive information here pertaining to management, consulting, and leadership. 

If you want more frequent information on a broader range of business topics, you can consider seeing my teaching thoughts and multimedia exhibits for my marketing course at my marketing posterous site. If you'd like to view diverse links (sometimes 1-6 per day) on business, social media, entrepreneurship, consulting, and random interests, you can see my Twitter page or look at the rolling list on the homepage of my main blog.

I plan to have two upcoming posts that I have not really seen discussed elsewhere, one on ethics in consulting and one on something to the effect of what an entrepreneur and an MBA taught one another. Either the links or complete postings for those will be provided on this blog.

Thanks for your readership!


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